RSM450H1 Study Guide - Final Guide: Fallacy, Intelligence Quotient, Fundamental Attribution Error
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WEEK 7: Heuristics & Biases
Heuristics = simple rules of thumbs and mental shortcuts
Biases = systematic errors that are a result of the use of heuristics
In the Textbook:
Anchoring & Adjustment
Correlation & Causalation
Fundamental Attribution Error
REPRESENTATIVE HEURISTIC: Specific scenes appear more likely because they are more
representative of how we imagine events. More detail/context = better explanation.
BIAS: Conjunction Fallacy – we assume the co-occurrence of two events is more likely than just
one (although statistically it is not more probable).
BIAS: Law of Small Numbers – small samples are expected to be highly representative of the
entire population (e.g. IQ test scores of 50 students)
BIAS: Gambler’s Fallacy – belief that an unsuccessful outcome is due after a run of good luck
and that chance is self-correcting. Bias that every part of a sequence should be locally
representative of the overall probability.
BIAS: Hot Hand – belief a player has a better chance of success after multiple successes
BIAS: Base Rate Neglect – people use base rates when it’s consistent with their theories. If
descriptions are provided, base rates are ignored.
Don’t be misled by highly detailed scenes – not always likely or representative of reality
Don’t misinterpret small samples
Chance is NOT self-correcting
Try to pay attention to base rates whenever possible
AVAILABILITY HEURISTIC: Assessing the frequency or probability of an event by how easily
those occurrences can come to mind.
BIAS: Hostile media effect – the coverage on shark attacks and car accidents happen more
often than cancer deaths or falling airplane parts. Does not mean shark attacks are more likely!
If something is easier to imagine/think of, has primacy or recency, and are vivid, then we use
the availability heuristic to judge the likelihood of situations.
Accurate record keeping
Beware of wishful thinking because desirable events are overestimated
Ask for uninvolved but informed 3rd parties for assessments
BIAS: Anchoring and Adjustment – insufficience adjustment from arbitrary starting value. It is
a very ROBUST bias that doesn’t disappear with: 1) Monetary Incentives, 2) Extreme Anchors,
3) Expertise, or 4) Involvement.
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